Question

Suppose that Last year, the monopolist "EpiPen" sold 500 EpiPens at a price of $500 per EpiPen. This year, the demand for EpiPen remained unchanged, but EpiPen sells 800 EpiPens. How did EpiPen's revenue change between last year and this year?

Answer 1

EpiPen's revenue increased by $150,000 this year, from $250,000 to $400,000, by selling 300 more units at the same price. The company, as a monopolist, took advantage of market conditions with little competition to increase its revenues substantially.

Step-by-step explanation:

You asked how EpiPen's revenue changed between last year and this year. Last year, they sold 500 EpiPens at $500 each, resulting in revenue of $250,000. This year, they sold 800 EpiPens; assuming they maintained the same price of $500 per EpiPen, their revenue would be $400,000. Therefore, the company's revenue increased by $150,000 this year.

In a broader context, a monopolist like EpiPen decides prices based on what the market is willing to pay and aims to maximize profit. Total revenue is calculated by multiplying the quantity sold by the price. For EpiPen, the demand remained unchanged, meaning people were willing to buy more at the same price, leading to an increase in total revenue.

Considering the controversy surrounding EpiPen's pricing strategies, their ability to increase revenue despite higher prices reflects their monopolistic position in the market, as they face little competition due to high entry barriers.